Here's Why You Should Retain Nevro (NVRO) Stock for Now
Nevro Corp. NVRO is well-poised for growth in the coming quarters, courtesy of its research and development (R&D) edge. The optimism led by a solid third-quarter 2022 performance and continued strength in its flagship Senza platform are expected to contribute further. However, stiff competition and dependence on third-party payors persist.
Over the past year, this Zacks Rank #3 (Hold) stock has lost 44.8% compared with the 14.7% decline of the industry and 13% fall of the S&P 500.
The renowned global medical device company has a market capitalization of $1.29 billion. The company projects 102.1% growth for 2022 and expects to maintain its strong performance. Nevro’s earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters and broke even in the other, the average earnings surprise being 9.2%.
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Let’s delve deeper.
R&D Edge: Nevro aims to continue to improve patient outcomes and expand patient access to HF10 therapy through enhancements to Senza and the development of newer indications, raising our optimism. Since the launch of the initial Senza system, the company introduced a number of product enhancements, like active anchors with improved performance, among others. The company continues to make enhancements to Senza to boost its performance.
Nevro, in October 2022, announced that its HFX 10 kHz Therapy is the only form of spinal cord stimulation (SCS) therapy to be referenced by the American Association of Clinical Endocrinology in its 2022 Diabetes Clinical Practice Guideline to treat Painful Diabetic Neuropathy (PDN).
Strength in Senza: We are optimistic about Nevro’s continued strength in its flagship Senza platform. Based on analysis from the company’s SENZA- Randomized Controlled Trial (RCT) and European studies, as well as the SENZA-PDN and SENZA-NSRBP (non-surgical refractory back pain) RCTs, Nevro believes the 10 kHz therapy can be an attractive treatment option for patients. In October, Nevro received the FDA’s approval for the Senza HFX iQ SCS system.
Strong Q3 Results: Nevro’s better-than-expected third-quarter 2022 results buoy optimism. The company recorded an improvement in overall top line and robust domestic revenues. An uptick in total U.S. permanent implant procedures and U.S. trial procedures were also seen. The sequential improvement in U.S. PDN trial procedures was encouraging.
Dependence on Third-Party Payors: Nevro’s success in marketing its products largely depends on whether U.S. and international government health administrative authorities, private health insurers and other organizations adequately cover and reimburse customers for the cost of its products. Access to adequate coverage and reimbursement for SCS procedures using Senza by third-party payors is essential for the acceptance of Nevro’s products by its customers.
Stiff Competition: Nevro operates in a highly competitive medical device industry, which is subject to technological change. The company’s success depends partly upon its ability to establish a competitive position in the neuromodulation market by securing broad market acceptance of its HF10 therapy and Senza products for the treatment of approved chronic pain conditions.
Nevro has been witnessing a positive estimate revision trend for 2022. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved from a loss of $2.34 per share to earnings of 8 cents.
The Zacks Consensus Estimate for the company’s fourth-quarter 2022 revenues is pegged at $113.2 million, suggesting a 10.2% improvement from the year-ago quarter’s reported number.
This compares to our fourth-quarter 2022 revenue estimate of $111.1 million, suggesting an 8.1% improvement from the year-ago quarter’s reported number.
Some better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, Cardinal Health, Inc. CAH and Merit Medical Systems, Inc. MMSI.
AMN Healthcare, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 3.3%. AMN’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 10.9%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AMN Healthcare has lost 6.1% compared with the industry’s 22.9% decline in the past year.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 11.7%. CAH’s earnings surpassed estimates in two of the trailing four quarters and missed the same in the other two, the average beat being 3%.
Cardinal Health has gained 50.5% against the industry’s 2.9% decline over the past year.
Merit Medical, sporting a Zacks Rank #1 at present, has an estimated long-term growth rate of 11%. MMSI’s earnings surpassed estimates in all the trailing four quarters, the average beat being 25.4%.
Merit Medical has gained 25.9% against the industry’s 2.9% decline over the past year.
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